F1 IPO To Have Shares Accompanied By Loan Note To Help Prevent Takeover

The F1 BOD will decide this weekend whether to go ahead with the stock flotation

F1 as part of its planned $2.5B IPO is “selling every new share with an accompanying loan note, and the two parts can’t be traded or sold separately,” according to P.R. Venkat of the WALL STREET JOURNAL. The “'stapled securities’ are unusual in Asia, but seen more often further south, in Australia.” Monash Univ. finance professor Kevin Davis said that the advantages of this structure for F1 is it “could bring in pension funds that are looking for a high yield in the form of dividends or interest payments on the loan.” He added that the structure also “makes it unlikely that the company could become a takeover target, as anyone attempting to buy it would also have to buy the loans and that would come with ‘bigger transaction costs.'” Venkat noted it will allow F1 to “continue to benefit from UK rules that make interest on qualifying shareholder loans tax-deductible.” However, one investor said that many funds that "can invest only in stocks won’t be able to buy.” The investor added that because the loan notes “aren’t rated, unlike many regular bonds, that could make some other investors wary” (WSJ.com, 5/30). In London, Andrew Clark notes the F1 BOD will decide this weekend whether to go ahead with the stock flotation after "casting a wary eye over the dismal fortunes of Facebook’s public offering.” F1 investor CVC Capital Partners “intends to publish a prospectus on Tuesday, if global financial markets are judged sufficiently resilient.” A source said, “We’ve obviously been paying attention to Facebook. We’d hope to get a better after-market reaction than Facebook did” (LONDON TIMES, 5/31).

NO SURE THING: The London TELEGRAPH reports F1 Chair Bernie Ecclestone has “thrown the prospect of next year's proposed Grand Prix of America into serious doubt.” The race, on a street circuit in New Jersey with the Manhattan skyline serving as a backdrop, “is scheduled to make its debut next year.” Although the event was announced in October, “it is understood to have run into financial, and in turn, contractual difficulties with Ecclestone.” He said, “I hope everything will be okay. They are sorting things out internally with some of their funds. If they are ready for 2013 we will have them” (London TELEGRAPH, 5/31).